Posts filed under ‘New York State’

Judging by the number of phone calls I’ve gotten on this subject in the last few days, I thought now would be a good time to answer some basic questions about the latest developments when it comes to ADA compliance and websites.

Are other New York State credit unions getting threatened with lawsuits claiming that their websites violate the ADA? Yes they are. I don’t want anyone to think that something they tell me privately will end up in a blog. The reason I am writing this is because the issue has become generic enough that it’s impacting many credit unions.

Are these lawsuits all being brought by the same people? No. We started hearing about ADA lawsuits about a year ago at the time the initial lawsuits were being brought at the urging of an organization representing blind and disabled individuals. But lawsuits are like viruses, left unchecked they mutate and it now appears that other lawyers and plaintiffs are jumping on the bandwagon.

What are my legal responsibilities? That’s still an open question. Unlike so many other issues with which credit unions deal on a daily basis, regulations have never been promulgated addressing the question of whether the ADA applies to websites. At least one set of litigants who bring these lawsuits point to the Website Content Accessibility Guidelines as providing an ADA compliant standard. As I mentioned in this recent blog, one of the first cases in New York to address this issue and now at least one court has held that the ADA does apply to websites. But this is an issue that is still very much up for debate. Incidentally, this whole issue could be resolved if the Justice Department were to issue regulations answering this question once and for all or if Congress would amend the ADA to specifically exempt out websites.

What are the legal issues? 42 U.S.C §12182provides that no person shall be discriminated against on the basis of disability “in the full and equal employment of the goods, services, facilities…of any place of public accommodation by any person who…operates a place of public accommodation.” The question is, are websites places of public accommodation or was the statute designed specifically to ensure access to physical locations such as branches?

What are the risks of non-compliance? The ADA is somewhat unique among Federal statutes in that there are no specific statutory damages for violations. Instead, plaintiffs can get an injunction forcing a violating party to get up to speed. But here’s a caveat: Successful plaintiffs are entitled to attorney fees.

Why does that make a difference? Critics argue that this creates a somewhat perverse incentive. If parties negotiate in good faith to settle their disputes without officially starting a lawsuit, there isn’t much money to be made. In contrast, a winning party can move for attorney’s fees. In other words, a statute that was designed to facilitate discussions can instead be a means for law firms to make a quick buck. See Rodriguez v. Investco, L.L.C., 305 F. Supp. 2d 1278, 1281–82 (M.D. Fla. 2004)

What should I do now? Each individual credit union should make its own decision of course, based on its own set of facts. One thing I would do is find out how close your website is to being ADA compliant. You may find that your website can rather cheaply and quickly comply with the ADA. I also would suggest however, that this is an issue you ultimately should seek legal advice on. Don’t assume that settling is automatically the best thing to do. Especially if you’re being threatened with damages to which the plaintiffs are not entitled.

What does the future hold? The industry is aggressively pursuing a statutory fix that would address this issue once and for all. There is also increasing involvement with some of these lawsuits. The Association recently sent out an email communication on the issue and more will be forthcoming.

If you look at the aggregate numbers for the credit union industry they remain solid. But that doesn’t keep me from living up to my reputation of having a glass half empty kind of guy.

I’ve been concerned for a while now that the industry is growing too dependent on auto loans and my concerns will be tested if current trends continue. Yesterday it was reported that auto sales fell for the first time in eight (8) years. If this is a blip reflecting an inevitable slow down after years of record growth, then it’s no big deal but if car sales declining becomes a trend then you will see an impact on the industry. I took a look at the latest NCUA statistics and currently loans for used cars grew 11.8% last year and 13% for new cars.

Cuomo: Fed Government Out For Blood

A fired up Governor Cuomo kicked off what promises to be one of the most challenging legislative sessions the state has experienced in years with a State of the State speech attacking the Federal government for attacking New York and promising to sue the Federal government for singling out the state in the recently approved tax plan which capped the deduction for state and local taxes. Here’s a sample of what the Governor had to say, “Washington has launched an all-out direct attack on New York state’s economic future by eliminating full deductibility of state and local taxes. What this is going to do, is this effectively raises middle class and working family’s property tax 20 to 25 percent all across the state. It raises their state income tax 20 to 25 percent all across the state. There is no conceivable justification. New York is already the number one donor state in the nation.”

He announced that he is not going to take this laying down. The state will be filing a lawsuit arguing that the tax plan unconstitutionally singles out New York for unequal treatment. I wouldn’t hold your breath. In the meantime, lawmakers have a deficit of several billion dollars to contend with which could grow if the Federal government follows through on plans to cut funding for entitlements such as Medicaid. Add to all this the fact that the Senate majority is up for grabs depending on the outcome of some upcoming special elections. And you have a recipe for a lot of tricky negotiations and gridlock.

ADA Lawsuits Alive and Well

This is just a friendly reminder that the wave of lawsuits against credit unions and other institutions for having websites which are not accessible to disabled users shows no sign of ebbing any time soon. On Wednesday for instance, a company that organizes marathons in the Miami area was sued over claims that its website violated the Americans With Disabilities Act. Keep in mind that under the ADA, the remedy is to fix the website. The plaintiffs can’t sue for damages.

The Incredible Shrinking Credit Union Industry

The long-term trend of credit union consolidation is continuing with gusto. I double checked this number after reading it in the CU Times this morning and sure enough another twenty-five (25) credit unions merged in November. Is this (a) A good trend (b) A bad trend Or (c) Nothing more or less than a reflection of the free market going about its creative destruction? My vote is (c) but that really is worthy of a blog in itself and I have run out of time for today. Peace out.

One of the first things I learned in credit union land was that you can deny services to a member who has caused you a loss. Specifically, all a member is ultimately entitled to is a share draft account and a vote at the annual meeting.

One of the first things I learned in bankruptcy law land was that you can’t seek to collect funds against a member who has filed for bankruptcy.

Let’s face it, these two bedrock principles are in conflict. What does a credit union have to tell that member she has to pay back her discharge debts before she becomes eligible for full-fledged membership benefits? This is precisely the question that a bankruptcy court in New York answered in a decision released this past week. It’s worth it for you to keep this one in your file: It’s the first 2nd Circuit case that I have seen dealing with this precise issue and it provides a good template against which to make sure your own policies are being implemented properly.

In re: JACOB R. MORGAN, Debtor., No. 16-61604, 2017 WL 6371349, (Bankr. N.D.N.Y. Dec. 12, 2017) involved a member of the PenFed Credit Union whose debts were discharged after filing for a Chapter 7 Bankruptcy. These debts included payments on a personal loan and some account overdrafts. Under 11 USC 727(b) of the Bankruptcy Code, a debtor discharged under Chapter 7 is relieved of all personal liability relating to pre-petitioned debt. In addition, he also receives the benefit of 11 USC 524(a)(2) under which no creditor can take any actions to recover or offset the discharged debt. Doing so is a violation for which the frustrated creditor can be fined. As many financial institutions know, there is no shortage of attorneys who supplement their income by alleging that the injunction against collection efforts has been violated.

When his debt was discharged our debtor sent an email to PenFed informing the credit union he would like to “rebuild his account.” In response, PenFed informed him that his checking account was closed due to an overdraft and that he had a remaining balance due to the credit union of $500. The credit union informed him that pursuant to policy, any member who caused the credit union a loss is subject to having all accounts and services terminated with the exception of maintaining a regular share account. The member claimed that by making his participation in the credit union contingent on repaying discharge debts, they were violating the law. After all, wasn’t the purpose of bankruptcy to enable members to get a fresh start?

The court answered that question this way: “While any refusal of future services by a pre-petition creditor has some coercive effect, the financial conveniences provided by a credit union to a debtor do not rise to such a level where a threat or conditioning of their withdrawal of services is necessarily coercive.”

The court concluded that required to pay pre-petition debt owed to a credit union in order to reinstate a financial relationship. “Such requirement in and of itself does not equate to improper coercion or harassment. Accordingly, while Debtor may have one less financial institution with which he can do business, the opportunity he received to take full control of his financial future after being granted his chapter 7 discharge is no less promising.”

In 2016, the legislature decided that it would be smart to make larger banks and credit unions responsible for maintaining abandoned property before the property was even foreclosed on. In return, for this absurd requirement, the legislature agreed to expedite the foreclosure process for institutions holding mortgages on abandoned property.

Yours truly has always been somewhat skeptical that the fast track reforms would work but, as the first cases under this new statute begin to hit the dockets the early returns are encouraging. In fact, I’m going to highlight a recent case that I would suggest those of you responsible for managing foreclosure activity use as a template as you manage the ridiculous number of obstacles that New York continues to put in the way when it comes to foreclosing on property that borrowers can’t afford. And remember, even if you’re a credit union that doesn’t have to comply with the property maintenance requirements, these cases demonstrate how important it is for your credit union to still follow the appropriate procedures for demonstrating that a mortgage property has been abandoned in order for your credit union to be able to take advantage of this new expedited procedure.

The most recent example I’ve seen is TEACHERS FED. CREDIT UNION v. GERGEL, 2017 NY Slip Op 51642. It’s impossible to summarize the case in less than five blogs not because the issues are so complicated, after all we are dealing with someone who decided not to pay a mortgage they owed and vacate their house, but because of the myriad of regulatory requirements with which the credit union and similarly situated lenders must comply. For example, the credit union had to document that a foreclosure settlement conference was held in which the defendant did not appear; the plaintiff could then move for an expedited foreclosure, but only after the defendant’s time to respond to the foreclosure lawsuit had expired; the credit union and court both properly served the appropriate notices and the credit union had to prove that it complied with the detailed procedures for determining that the property was in fact abandoned.

It’s hard to believe that this is an improvement over New York’s existing system but in a state where it is not uncommon for foreclosures to take an excess of four years, the fact that the credit union was able to file this lawsuit on October 3, 2016 and receive the go ahead to sell the property is a marked improvement.

Does this mean that New York doesn’t have to reform its foreclosure process? Absolutely not. For one thing, the improvements made by the legislature just apply to vacant and abandoned property. For another, even this properly applied application of the statute demonstrates how many moving pieces have to align before even a simple foreclosure can go forward. Judges have to be available to hear the cases, similar if not downright duplicative notices have to be sent and when we see the next upsurge in foreclosures, the system will once again be overwhelmed.

The simple truth is that the existing foreclosure system has provided delinquent homeowners with so many procedural protections that there is no longer an appropriate balance between the understandable desire to make sure that someone truly should lose their house and the need to keep property values stable by making foreclosures a feasible option.

I have more good news to report on the state-charter front. Yesterday, New York State Superintendent Maria Vullo gave final approval to a request by state-chartered credit unions that they be able to operate student branches to the same extent as their Federal brethren. This is a huge improvement for those credit unions interested in helping kids learn the basics of banking. Most importantly, under the wild card approval, students who are members of credit unions as a result of a student branch won’t lose their membership just because they graduated. Here is a great joint agency guidance on this issue a couple of years ago.

Perhaps it’s because we’re in a magical season when hope seems to spring eternal, but it’s amazing to me that any responsible banking regulator can say this with a straight face. Look at the statistics. The big banks today are bigger than they were a decade ago and if anything, the economy is more, not less dependent on them. In fact, the greatest political failure of the last decade has been the unwillingness of a political system to take on a banking system run amuck.

Statements like these have real consequences. There will be another banking crisis and the American public needs to know that as things currently stand, they are just as likely to have to bail out the big guys as they were in 2008.

This headline might be a tad premature but it appears that the State Senate Democratic Caucus headed by Andrea Stewart-Cousins and the 8 member Independent Democratic Caucus by Senator Jeff Klein have reached a preliminary agreement to unify, potentially paving the way for cutting Republicans out of holding any power in the state legislature.

How big of a deal is this? Since the end of WWII, Democrats have held power without Republican help only briefly in 1964, 2008, and 2010. In the latter two cases, Republicans maintained control by entering into power sharing agreements with a group of breakaway Democrats.

Yesterday, Senator Jeff Klein issued a statement in which he indicated that the Democratic factions had come to an agreement about how to work together. In a statement released yesterday evening, “The State Party’s assurance that our progressive legislative agenda will be advanced is a victory for the people of New York,” Klein said. “I look forward to implementing the terms that have been outlined in yesterday’s letter.”

Still this appears to be an agreement to agree. The new power sharing arrangement is reportedly scheduled to take effect only after the state budget is negotiated. Currently there are 23 Democrats in the traditional Senate Democratic Caucus and 8 Democrats in the breakaway IDC. Simcha Felder is a Democrat who currently caucuses with the Republicans but has indicated in the past that he is willing to work with whatever party can most help his constituents. With special elections taking place next year, a unified Democratic conference should be able to take control without needing Republican help, but then again we have been here before.

NY Credit Union Fined By DFS

New York’s Department of Financial Services announced that The United Nations Federal Credit Union and Lloyds of London were fined $1.47 million for marketing and offering life insurance tied to the credit union’s credit and debit card program without being appropriately licensed. Here is some additional information.

Round One Goes To Mulvaney

Also yesterday evening, a Federal District Court Judge refused to block Mick Mulvaney from taking over as the interim head of the CFPB while continuing to serve as the Director of the Office of Management and Budget. I haven’t seen a transcript of the proceedings yet but according to this article, the Judge explained “Nothing in the statutes prevents Mr. Mulvaney from holding both of these positions.” Hopefully this silliness can end soon and we can start concentrating on working with Mr. Mulvaney to bring much needed mandate relief to credit unions.

I’m exaggerating a little with the headline but I’m going on hiatus until next Monday and there are a couple of things I thought you should know about before then.

Mulvaney To Be CFPB Director?

First, if CBS news is correct, former conservative Congressman and current Office of Management and Budget Director Mick Mulvaney will soon be named the interim director of the CFPB. This is big news. Mulvaney made a name for himself as one of the most fiscally conservative members of Congress. This morning, a lot of his quotes bashing the CPFB are getting attention. But for astute credit union junkies, or people paid to follow this stuff, Mulvaney’s name should ring a bell for another reason. He was one of the harshest critics of former NCUA Chairman Debbie Matz’s obstinate refusal to hold public budget hearings. She even suggested at one point that lobbyists pushing for these hearings were not really representing the interest of credit unions. Here is part of his response that I find most amusing: “Are you a CU member? I am,” continued Mulvaney. “And I think they are representing me when they ask for those things. As a member of the credit union, I like the fact the credit union is trying to guard my money and be conservative with that.”

Suffice it to say that if Mulvaney takes hold of the CFPB, we are in for some interesting times.

NY To Propose Work Scheduling Rules

With the caveat that I am not an employment law lawyer, after talking to a workmate who actually does know this stuff (aka Chris Pajak), I’ve decided to give you a head’s up about regulations to be posted by the Department of Labor on November 22, 2017. NY has a 45 day comment period.

This regulation is the accumulation of a series of hearings held by the New York State Department of Labor over the next several months. Employee groups complain that low wage employees are increasingly being given less than a week’s notice of their schedule, making it difficult to make arrangements for accommodations like childcare and these employees often show up for work only to be sent home. Generally speaking, under New York’s existing “Report To Pay” rules, there are circumstances when employers are required to pay employees for reporting to work even if the employer has no work for them. Specifically, a non-exempt employee is entitled to the lesser of four (4) hours of pay or the pay he/she would have received had he/she worked the shift.

On that note, I will be back on Monday. Enjoy your Thanksgiving and thanks for reading.